Tuesday, August 02, 2005

An incentive to cheat

I've written a couple of articles already giving reasons why I'm not keen on Software patents. (Embrace and Extend, and 1% inspiration, 99% perspiration). I see no reason to stop writing them though, while there are so many other good reasons to oppose them. For example, consider all the economic reasons.

Now most economists think that by default regulation in the markets is a bad thing, if sometimes a necessary evil. Another no-no for economists are monopolies as they make things expensive for everyone. In fact, one of the few types of regulation that economists support is anti-monopoly regulation. A patent is regulation creating monopoly, so needs extremely good reasons for it even to be considered.

The normal reasons given for patents is that without protection people will not put the effort into research and development, only to have the ideas "stolen" by someone else. I disagree with this in most cases - being first to market with a new feature in software is often enough to start a success. And even without patents a company will require constant research and development to stay ahead of the competition, and so will do that R&D. I would argue that just as much innovation happens in the open source world as in the commercial world in software. Innovation happens because people have a problem they want to solve. Of course there are counter-arguments to this. However, let us look at some other economic arguments against patents, especially software patents..

In "The Armchair Economist" (a good book) Stephen Landsburg argues that economics can be summed up as "people respond to incentives". I'd like to look at some places where the incentives lead to the wrong result.

The first place is in the pay structure. Patent Office examiners are government employees, and get paid worse than in the private sector (though they do have some nice perks). So if people were only motivated by salary, you would get worse people checking the patents than the law firms who help file most of them. In my experience however, checking for prior art for a patent is actually harder than having the idea in the first place, as you need someone who is intelligent enough to understand the idea to spend a lot of time doing a lot of tedious searches. It must be even harder in the patent office where you only have the horrible legalese that patents are translated into, rather than having a human being to answer your questions. And it would seem very difficult to incentivise patent office inspectors to do a good job when more and more patents are filed every year giving a bigger and bigger workload.

Secondly, consider the following situation. Once when I was in the process of preparing to file a patent, I spent weeks diligently looking for previous publications which might have shown someone else had thought of the idea first. Eventually, a couple of days before we were due to submit the application, I found a paper in an obscure japanese journal which theoretically covered my idea. Let's look at my incentives. By that point I was an expert in the area. I knew that if I submitted the application there was no way the patent examiner would have found this paper, the link between the paper and my idea required expert knowledge to understand. So the patent would have been granted. Also, investors think that patents are intellectual property, so more patents protecting key ideas mean that you have more property. So your must be company more valuable. So if I filed the patent I would have increased the value of my company through research, and made my boss happy, and increased my chances of a higher salary and promotion.

Finally, getting a patent invalidated even if it has prior art is an expensive, slow process, so if someone did use the idea it might be cheaper for them just to pay a license fee or swap patents than to actually get the claim revoked. So all the monetary incentives meant I should have filed.

For many small startup companies struggling to get investment the temptation must be there to file patents, as they will almost certainly be granted, and then they look good to investors whether they are valid or not. This has to be a bad thing.

I'd love to do a research project on this. Pick 10 software patents filed in the last 5 years in the US. Get some trained researchers to really search for a few months for each of them looking for prior art, with the best tools available. If prior art is found, go through the whole process of getting as many claims as possible invalidated. From this you could get an estimate of how many bad patents are filed, and how much it costs to invalidate them.

For more on this issue see Tim O'Reilly's page. Unfortunately the BountyQuest project that it mentioned died a death.